Note 15 – Warrants

No warrants were issued, exercised, forfeited or expired during the three months ended August 31, 2026. The 508,064 common stock purchase warrants issued in fiscal 2026 in connection with the Lender’s Master Note facility (250,000 issued January 8, 2026 and 258,064 issued February 18, 2026, each with an exercise price of $0.001 per share, a five-year term, cash or cashless exercise and a 4.99% beneficial ownership limitation) remain outstanding and exercisable. The warrants permit the holder, at its election, to substitute for the exercise price the variable price of any security the Company subsequently issues at a price that varies with the market price of the common stock, and require the Company to purchase the warrants for cash at their Black-Scholes value at the holder’s request following an event of default under the related notes. Because the warrants are therefore not indexed solely to the Company’s own stock and could require net cash settlement in circumstances outside the Company’s control, they do not meet the conditions for equity classification in ASC 815-40 and are accounted for as derivative liabilities measured at fair value, with changes in fair value recognized in earnings. In the 2026 Form 10-K the warrants were classified in permanent equity at their issuance-date fair value of $200,225. During the three months ended August 31, 2026 the Company reclassified the warrants to derivative liabilities, recording a liability of $75,025, being their fair value at August 31, 2026 determined using the Black-Scholes model (closing price $0.1485, exercise price $0.001, remaining terms of 4.4 to 4.5 years, expected volatility 85% and a risk-free rate of 3.94%), and a gain of $125,200 within gain on change in fair value of derivative liabilities, of which $113,768 represents the decrease in fair value between issuance and May 31, 2026 that would have been recognized in fiscal 2026 had the warrants been classified as liabilities at issuance. Management evaluated the misclassification under SEC Staff Accounting Bulletins No. 99 and No. 108 and concluded that it was not material to the previously issued fiscal 2026 financial statements or to the current period, and has corrected it in the current period as an out-of-period adjustment. At August 31, 2026 the warrants had a weighted average remaining contractual life of 4.42 years and an aggregate intrinsic value of approximately $74,939, based on the $0.1485 closing price of the common stock on August 31, 2026 less the exercise price. Warrants issued after the quarter end are described in Note 24.